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Thailand’s economy reported year-on-year growth of 2.7% in the first quarter of 2023, aided primarily by the rebound in tourism and private consumption. The Thailand GDP growth beat market estimates and accelerated from the 1.4% growth recorded in the final quarter of 2022, making Q1 the sixth consecutive quarter of expansion. The Thai economy grew 1.9% quarter-on-quarter.
The GDP figures come on the same day as the preliminary results of the country’s general election, where the opposition triumphed over the incumbent leadership. Tourism and manufacturing will likely play a key role in the new government’s economic policy.
Meanwhile, the Bank of Thailand increased its policy rate from 1.50% to 1.75% in March. The fifth consecutive rate hike. In April, the ASEAN country’s inflation rate fell to 2.7%, the lowest inflation rate since December 2021.
What helped Thailand GDP?
Easing all entry rules to welcome foreign tourists in the second half of 2022 supported the tourism industry’s recovery, which constitutes around 18% of Thailand’s GDP. As per the Tourism Authority of Thailand, the country saw over 6.5 million foreign tourists in the first quarter of this year. The return of Chinese tourists also played a significant role in pushing the growth in tourism and demand.
Private consumption saw a 5.4% growth in the first quarter, slowing down from the 5.7% growth seen in the previous quarter. Growth in the agricultural sector more than doubled over the last quarter to 7.2%, due to higher yields of main crops and cattle.
Meanwhile, the slowdown in global markets has taken a toll on Thailand’s trade. According to the Ministry of Commerce, exports contracted 4.5% in the first quarter, mainly due to the weak economic outlook of major trade partners, cutting purchasing power in the US, Europe and Asia.
The Ministry of Commerce estimates Thailand’s exports to grow between 1% and 2% in 2023, down from the 5.5% growth seen in 2022. Thailand’s economic planning agency, the National Economic and Social Development Council (NESDB), expects exports to contract 1.6% in 2023. However, the NESDB has placed faith in tourism and consumption to support economic growth and has maintained its 2023 growth forecast of between 2.7% to 3.7%.
“The external outlook for Thailand looks relatively bright thanks to the ongoing tourism recovery, despite the downturn in the global manufacturing cycle. The labour-intensive tourism sector will also support income, though we think stronger-than-expected growth in domestic demand in Q1 will soften in the coming quarters,” wrote Sung Eun Jung, Lead Economist at Oxford Economics.
